Tesla shares in the bubble territory amid rumors about Apple cars, says the researcher

LONDON – Tesla shares are too expensive and on the balloon territory compared to its performance, according to Vitali Kalesnik, partner and head of research at Europe at Research Affiliates.

“While Tesla is an excellent company, Tesla shares are showing strong signs of being overvalued,” Kalesnik told CNBC’s “Squawk Box” on Tuesday, following a report that Apple plans to re-produce its own electric car. -driving technology.

Tesla’s share price before the market opened on Tuesday was $ 649.86, and the company is currently valued at $ 616 billion, which is more than the largest nine combined car manufacturers.

Kalesnik believes that the current price of Tesla’s stock is too high, given the sales, the number of car production and other fundamentals. “When we look at the types of assumptions we need to justify these assessments, we would need very, very aggressive assumptions,” he said.

Tesla’s margins are “largely on par” with the rest of the industry, and Kalesnik said it means “Tesla’s current valuation is in bubble territory.”

Tesla’s share price rose by more than 650% in 2020, with several key events contributing to the company’s rise in shares. In May, Tesla began production at the California Gigafactory after a pandemic shutdown and a legal battle with the state. In July, Tesla recorded its fourth consecutive quarter in terms of higher profit and delivery estimates. Shares also gained momentum in late summer, when Tesla announced its first share split.

Tesla shares rose to record high after electric car maker announced it was debuting on the S&P 500, a stock index that measures the performance of 500 major US-listed companies.

“When it’s included in the S&P 500, investors have to buy it at a very high price, and that’s likely to have pretty bad consequences for investors,” Kalesnik said.

Tesla shares fell on Monday, when it debuted on the S&P 500, and the stock ended 6.5% lower than the previous session’s record.

Optimism for Tesla’s stock has eased after Reuters reported that Apple plans to produce an electric passenger car by 2024. New technology in Apple’s car could greatly reduce the cost of battery production and expand its range, Reuters reported. Apple declined to comment.

While an Apple car could be a few years away, there are other companies that already produce a significant number of electric vehicles. But Kalesnik believes investors do not fully appreciate the fact that there is competition in the EV market.

“Tesla has some advantages in the electric vehicle market and many of its competitors recognize this,” Kalesnik said. “That being said, its competitors have significantly higher costs [together] very aggressively, billions of dollars intend to enter the market. Volkswagen already produces. Toyota has serious plans and recently came up with its progress regarding the solid state battery, which should revolutionize the EV industry. “

Despite his concerns, Kalesnik said he would not recommend short-circuiting Tesla stock. “The bull market for Tesla can exceed your capital and your appetite for shorts,” he said. “But given the volatility, you can burn very significantly.”